Bonus Limits May Drive More to Hedge Fund Jobs

Politicians in Britain, and to a lesser extent in France, Germany and the U.S., are riding a wave of public outrage against investment banks doling out huge bonuses. Especially since many of these banks were propped up by taxpayer money during the financial crisis.

But hedge funds did not receive government support, and that fact may allow them to avoid similar restrictions on employee compensation. If bank bonus levels are restricted in Britain or elsewhere, it could give hedge funds a competitive edge in hiring for trading positions. Already firms such as GLC Partners, Greylock Capital and Duet Group have reportedly recruited former bankers. In 2009, several former Societe Generale bankers left to form their own hedge fund, Nexar Capital.

One way for banks to fight back would be to continue to pay their top people big bonuses and absorb the extra cost of the proposed taxes. It’s a strategy some banks are reportedly considering.

This may be good for hedge funds as they did not face the outrage when investment banks have come to encounter mostly because of the bonus thing. If at all there is something called restrictions on compensation, there would definitely be some migration to Hedge Funds and it would see better talents from banking space. No wonder, if there are new startups in Hedge fund buoyed by the new talent.